Order 2016-1-13 Served: January 28, 2016 DEPARTMENT UNITED OF STATES TRANSPORTATION OF AMERICA UNITED STATES OF AMERICA DEPARTMENT OF TRANSPORTATION OFFICE OF THE SECRETARY WASHINGTON, D.C. Issued by the Department of Transportation on the 28 th day of January, 2016 Application of Docket DOT-OST-2014-0114 for a certificate of public convenience and necessity under 49 U.S.C. 41102 to engage in interstate scheduled air transportation of persons, property, and mail SUMMARY FINAL ORDER By this order, we find that Aerodynamics Incorporated ( ADI ) is fit, willing, and able to engage in interstate scheduled air transportation of persons, property, and mail using small aircraft, 1 and issue to it a certificate of public convenience and necessity, subject to the Terms, Conditions, and Limitations attached. BACKGROUND By Order 2015-11-24, issued November 30, 2015, the Department tentatively found ADI fit to engage in interstate scheduled air transportation of persons, property, and mail using small aircraft. Interested persons were given 14 business days to file objections to the order, with answers to objections due within 7 business days thereafter. On December 7, 2015, Via Airlines, Inc. ( Via Airlines ), and Mr. James Paquette (together, the Objectors ) filed in Docket DOT-OST-2014-0114, an objection claiming that ADI and its principal, Mr. John Beardsley, failed to disclose that ADI Acquisition Co., LLC ( ADI Acquisition ), the parent company of ADI, defaulted on a promissory note due to Mr. Paquette, the party whom ADI s former Chief Executive Officer, Mr. Scott Beale, defrauded. 2 According to the Objectors, as part of the purchase of ADI, ADI Acquisition tendered a $400,000 promissory note, plus interest, late fees and collection costs, to Mr. Paquette, as holder of the note, and with Mr. Beardsley, as the guarantor of the 1 Small aircraft is defined as any aircraft originally designed to have a maximum passenger capacity of 60 seats or fewer or a maximum payload capacity of no more than 18,000 pounds. 2 See Order 2015-11-24. Mr. Beale was found liable in a civil case of defrauding Flight Test Aviation, Inc. ( FTA ), a company owned by Mr. Paquette. The court awarded Mr. Paquette $500,000 in compensatory damages and $100,000 in punitive damages.
2 note. The Objectors state that ADI Acquisition defaulted immediately on the note, failing to pay the monthly installments beginning in August 2015, thus bringing the total owed to Mr. Paquette, as of the date of the objection filed, to approximately $430,000. The Objectors assert that the Department should include this amount in calculating the financial fitness test of ADI, increasing the funds ADI needs to meet the financial fitness test from approximately $1.75 million to about $2.15 million. Lastly, the Objectors assert that the immediate default of the agreed-upon amount due to Mr. Paquette raises a major red flag as to ADI s fitness and ADI s failure to report its true financial condition segues to the question of its compliance disposition. 3 On December 30, 2015, ADI submitted an answer claiming that the objection filed by Via Airlines and Mr. Paquette is moot because the promissory note referenced in their objection is paid in full. Regarding the Objectors issue with ADI failing to inform the Department that an outstanding judgement had been brought against the company, its owners, or its key personnel, ADI states that in July 2015, it informed the Department of a $300,000 payment to Mr. Paquette, as well as the $400,000 promissory note. In addition, ADI points out that the promissory note is between ADI Acquisition and Mr. Paquette and that if the promissory note remained outstanding, this would not affect ADI s financial fitness threshold since the note is not an ADI obligation and the company demonstrated that it had access to sufficient funds from Mr. Beardsley, ADI s ultimate owner, to meet the Department s financial fitness test. Moreover, ADI claims that the objection is an attempt by Via Airlines to retaliate against ADI for filing and obtaining relief in a federal lawsuit against Via Airlines and others for, among other things, breach of contract. Furthermore, ADI provided a letter dated December 29, 2015, indicating that ADI Acquisition will wire transfer more than $410,000 to the Objectors, the amount of which includes the remaining principal balance, all accrued interest, and all late fees on the promissory note. On January 5, 2016, the Objectors filed a response to ADI, arguing that the applicant s answer failed to address the underlying issue that the company is continuing its pattern of non-compliant behavior even under its new ownership. The Objectors state that, instead of acknowledging the default on the promissory note and its failure to disclose this information to the Department, ADI focuses on its full payment of the note and the assertion that the objection was an attempt at retaliation by Via Airlines for ADI s lawsuit against it. Also, the Objectors state that the promissory note was not paid in full prior to ADI s filing with the Department; it did not include all outstanding legal fees and collection costs as agreed upon. Additionally, the Objectors contend that ADI s claim that it was unaware that the promissory note was accelerated is unfounded since notice was provided by letter dated November 17, 2015, to Mr. Beardsley that ADI was in default and payment in full was requested by Mr. Paquette. Lastly, the Objectors note that ADI only made payments on the promissory note when their objection was filed in the docket of this proceeding. On January 6, 2016, ADI filed a response. First, the applicant contends that its past has no bearing on its current fitness and that ADI has well-qualified officers and managers that are known to the Department and new owners. Second, ADI claims that it was under no obligation to advise the Department of any temporary default under the Department s fitness requirements since there was no action or outstanding judgment related to the note and that Mr. Beardsley in fact, paid the full amount of the promissory note plus interest and late fees prior to the filing of ADI s reply. Third, the note, interest, and late fees have been paid and the Objectors concede that payment on the note has been paid, with a small amount remaining pending a final review of the fees and collection costs still outstanding. ADI asserts that this amount still owed to the Objectors has no material impact on the financial resources available to ADI. 3 See Objection of Via Airlines, Inc., and James Paquette, dated December 7, 2015, at 3.
3 On January 11, 2016, ADI filed a statement advising the Department that a wire transfer for the final settlement of all claims relating to the collection costs and fees on the ADI Acquisition promissory note had been paid on January 11, 2016. ADI also filed a copy of the correspondence between Mr. Bitman, counsel for the Objectors, and Mr. Berning, counsel for ADI Holdings, agreeing to the final settlement amount. DECISION We have reviewed the pleadings in this case and find that ADI is fit, willing, and able to provide interstate scheduled air transportation of persons, property, and mail. Despite the allegations raised by the Objectors regarding ADI s failure to disclose financial information that could impact the availability of financial resources needed to meet the Department s financial fitness test, ADI provided evidence on the record that it has access to sufficient financial resources available to it from its owner to support its proposed scheduled operations. Moreover, ADI adequately resolved the issue regarding a $400,000 promissory note due to the Objectors and filed verification of full payment on the note. Additionally, as is our practice, prior to making any authority awarded to ADI effective, we will require the company to demonstrate that it continues to have access to the financial resources needed to meet our financial fitness test. Further, the Department has advised ADI that if found fit, it becomes subject to the requirements of 49 U.S.C. 41110(e) which provide that it must remain fit in order to continue to hold its authority to provide air transportation services. The Department may also request updated financial, operational, or managerial information from the air carrier to conduct a Continuing Fitness Review. In addition, by notice dated July 21, 1998, the Department requested that air carriers provide a 30-day advance notification of any proposed change in ownership, recapitalization, or restructuring. If ADI fails to file this updated information or if the information fails to demonstrate that the air carrier will continue to be fit, the Department may take such action as is appropriate, including enforcement action or steps to modify, suspend, or revoke the air carrier s certificate authority. Therefore, by this order, we confirm our tentative findings in Order 2015-11-24, and find ADI fit to engage in interstate scheduled passenger air transportation. ACCORDINGLY, 1. We find that Aerodynamics Incorporated is fit, willing, and able under 49 U.S.C. 41102 to provide interstate scheduled air transportation of persons, property, and mail using small aircraft. 2. We issue a Certificate of Public Convenience and Necessity to Aerodynamics Incorporated, subject to the Terms, Conditions, and Limitations attached. 3. We direct that should Aerodynamics Incorporated propose to operate large aircraft, 4 it must first notify the Department in writing at least 45 days prior to the proposed operation and demonstrate its fitness to conduct such operations before their commencement. 4. We direct Aerodynamics Incorporated to submit to the Air Carrier Fitness Division a first-year progress report 5 within 45 days following the end of its first year of actual certificated flight operations using small aircraft. 4 Large aircraft is defined as any aircraft originally designed to have a maximum passenger capacity of more than 60 seats or a maximum payload capacity of more than 18,000 pounds.
5. We will serve a copy of this order on the persons listed in Attachment A. By: 4 BRANDON M. BELFORD Deputy Assistant Secretary for Aviation and International Affairs An electronic version of this document is available at http://www.regulations.gov 5 The report should include a description of the air carrier s current operations (number and type of aircraft, principal markets served, total number of full-time and part-time employees), a summary of how these operations have changed during the year, a discussion of any changes it anticipates from its current operations during its second year, current financial statement, and a listing of current senior management and key technical personnel. The air carrier should also be prepared to meet with staff members of the Fitness Division to discuss its current and future operations.
Certificate of Public Convenience and Necessity for Interstate Air Transportation This Certifies That is authorized, subject to the provisions of Subtitle VII of Title 49 of United States Code, the orders, rules, and regulations issued thereunder, and the attached Terms, Conditions, and Limitations, to engage in interstate air transportation of persons, property, and mail. This Certificate is not transferable without the approval of the Department of Transportation. By Direction of the Secretary Issued by Order 2016-1-13 On January 28, 2016 Effective (See Attached) Brandon M. Belford Deputy Assistant Secretary for Aviation and International Affairs
Terms, Conditions, and Limitations Attachment is authorized to engage in interstate air transportation of persons, property, and mail between any point in any State, territory, or possession of the United States or the District of Columbia, and any other point in any of those entities. This authority is subject to the following provisions: (1) The authority to operate under this certificate will not become effective until six (business) days after the Department has received the following documents, provided, however, that the Department may stay the effectiveness of this authority at any time prior to that date: (a) A copy of the holder's Air Carrier Certificate and Operations Specifications authorizing such operations from the Federal Aviation Administration (FAA). (b) A certificate of insurance on OST Form 6410 evidencing liability insurance coverage meeting the requirements of 14 CFR 205.5(b) for all of its aircraft. (c) A statement of any changes the holder has undergone in its ownership, key personnel, operating plans, financial posture, or compliance history, since the date of the Show Cause Order in this case. (d) A revised list of pre-operating expenses already paid and those remaining to be paid, as well as independent verification that the holder has available to it funds sufficient to cover any remaining pre-operating expenses and to provide a working capital reserve equal to the operating costs that would be incurred in three months of operations. (2) Pending receipt of effective authority, the holder may not accept payment of any kind (i.e., cash, check, or credit card), issue tickets for the operations proposed under this certificate, or enter into contracts with charter operators, and any advertisement by the holder must prominently state: "This service is subject to receipt of government operating authority." (3) The holder may not operate aircraft originally designed to have a maximum passenger capacity of more than 60 seats or a maximum payload capacity of more than 18,000 pounds. (4) The holder shall at all times conduct its operations in accordance with the regulations prescribed by the Department of Transportation for the services authorized by this certificate, and with such other reasonable terms, conditions, and limitations as the Department of Transportation may prescribe in the public interest.
2 (5) The holder's authority under this certificate is effective only to the extent that such operations are also authorized by the Federal Aviation Administration (FAA), and comply with all U.S. Government requirements concerning security, including, but not limited to 49 CFR Part 1544. * (6) The holder shall at all times remain a "Citizen of the United States" as required by 49 U.S.C. 40102(a)(15). (7) The holder shall maintain in effect liability insurance coverage as required under 14 CFR Part 205. Failure to maintain such insurance coverage will render a certificate ineffective, and this or other failure to comply with the provisions of Subtitle VII of Title 49 of the United States Code or the Department's regulations shall be sufficient grounds to revoke this certificate. (8) The holder is authorized to conduct charter flights in interstate and/or foreign air transportation in accordance with the provisions of 14 CFR Part 212. (9) Should the holder propose any substantial changes in its ownership, management, or operations (as that term is defined in 14 CFR 204.2(l)), it must first comply with the requirements of 14 CFR 204.5. (10) In the event that the holder does not commence actual flying operations under this certificate within one year of the date of the Department's determination of its fitness, its authority shall be revoked for dormancy, unless the holder is conducting operations under another type of certificate authority. Further, in the event that the holder commences operations for which it was found "fit, willing, and able" and subsequently ceases all such operations, its authority under all certificates held shall be suspended under the terms of 14 CFR 204.7 and the holder may neither recommence nor advertise such operations unless its fitness to do so has been redetermined by the Department. Moreover, if the holder does not resume operations within one year of its cessation, its authority shall be revoked for dormancy. * To assure compliance with all applicable U.S. Government requirements concerning security, the holder shall, before commencing any new service (including charter flights) to or from a foreign airport, contact its Principal Security Inspector (PSI) to advise the PSI of its plans and to find out whether the Transportation Security Administration has determined that security is adequate to allow such airport(s) to be served.
Appendix A SERVICE LIST FOR MR ROBERT COHN MR PATRICK RIZZI ATTORNEYS FOR HOGAN LOVELLS US LLP 555 THIRTHEENTH STREET NW WASHINGTON DC 20004 MR F DARRELL RICHARDSON PRESIDENT MARK MAZOR FEDERAL AVIATION ADMINISTRATION 45005 AVIATION DRIVE AFS-900 SUITE 131 DULLES VA 20166 MR PETER J LYNCH ASSISTANT CHIEF COUNSEL FOR ENFORCEMENT AGC-300 FEDERAL AVIATION ADMINISTRATION 800 INDEPENDENCE AVENUE SW WASHINGTON DC 20591 MR ALTON CLAMP PRINCIPAL OPERATIONS INSPECTOR FEDERAL AVIATION ADMINISTRATION ATLANTA GA 30354 OFFICE OF AIRLINE INFO DOT/RITA/BTS E-36 - RTS-42 1200 NEW JERSEY AVENUE SE WASHINGTON DC 20590